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Post by recordingengineer on Dec 1, 2023 12:38:32 GMT -6
I don’t disagree, but one of the biggest problems has been the honor system hasn’t worked. Fine. However, if you’re going to change the system, then truly change it. A or B are the only options. Either the honor system or, in today’s world, absolutely every purchase and sale is automatically (digitally) tracked by the government. Life would be so much easier, except, think of all the people out of jobs! Well, I suppose this new system C is the better way to go. That way, you can choose not to play, as long as you can afford to pay more than what you actually owe. Plus, everybody gets to keep their jobs. I suppose I shouldn’t expect simple answers for complicated problems. Such conundrums is why I would not be a good leader. |
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Post by chessparov on Dec 1, 2023 13:28:32 GMT -6
you have to prove your not in business. Let that sink in. Uh oh. Plenty of Monkey Business here. Especially when I play the Conundrums at home. Chris |
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Post by chessparov on Dec 1, 2023 13:32:22 GMT -6
Sounds like we should start a "RGO gift exchange" section in the classifieds  Maybe I could finally achieve $uccess. As a Wrapper. Chris |
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Post by recordingengineer on Dec 1, 2023 13:33:36 GMT -6
Uh oh. Plenty of Monkey Business here. Especially when I play the Conundrums at home. Chris I hear them as bongos. |
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Post by the other mark williams on Dec 1, 2023 14:22:19 GMT -6
I refer you back to my first paragraph: “You are required to pay taxes on any income you have for the year. (Note that financial gifts are not "income," and do not count as such.)” It doesn’t matter whether you’re calling yourself a business or not. The IRS requires you to pay taxes on any income you have for the year. If you received a 1099 from someone, that means by definition that it was income. Which one is it? Income or profit? Income. The point is: They’re MAKING them 1099 someone as if it’s proof that it’s profit income. The key word here is profit. What’s the process when a person has been 1099’d, is not a business, it’s absolutely not profit, and can prove it all? No, they're not. This is not about profit. Reverb (for instance) is entirely agnostic as to whether you turned a profit for the year or not. They simply provided a marketplace, and you used it (I'm being hypothetical here - I obviously don't know if you used it or not...). This is simpler than you're making it. You have two choices with regard to your music-making, production, mixing, mastering, etc.: - You are engaging in a business.
- You are engaging in a hobby.
If you are engaging in a business, then you have the opportunity to list ALL of the expenses you had for the year in running that business, and those expenses count against any business income for the year. Two columns: Income and Expenses.
If you are engaging in a hobby, then you do NOT have the opportunity to list any of those expenses, because there is nothing in the tax code about counting "hobby expenses" against one's bottom line. There is absolutely no Schedule in the tax code for a hobby, nor should there be. So you're left with one column here: Income.
Believe me, it dramatically behooves you to claim your music career as a business, rather than as a hobby. That way, everything you buy (music-related) is an expense toward running that business. If it's a hobby, you can't count anything.
But either way, whether it's a business or a hobby, the IRS requires you to report all income you had for the year, from all sources. (Again, there are some things that are not considered income, such as financial gifts or certain kinds of donations.)
And what's more, nothing I have said above is any different than any other tax year. It has always been thus. You may have chosen to not report all of your income in the past--hell, you can choose to not report all income going forward if that's what you want to do--but none of the rules for you or me have changed.
Does this make more sense? I really want to explain things in a way that provides clarity. I'm not defending current tax policies, I'm just trying to explain what those policies are and how to navigate them.
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ericn
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Post by ericn on Dec 1, 2023 15:19:05 GMT -6
Which one is it? Income or profit? Income. The point is: They’re MAKING them 1099 someone as if it’s proof that it’s profit income. The key word here is profit. What’s the process when a person has been 1099’d, is not a business, it’s absolutely not profit, and can prove it all? No, they're not. This is not about profit. Reverb (for instance) is entirely agnostic as to whether you turned a profit for the year or not. They simply provided a marketplace, and you used it (I'm being hypothetical here - I obviously don't know if you used it or not...). This is simpler than you're making it. You have two choices with regard to your music-making, production, mixing, mastering, etc.: - You are engaging in a business.
- You are engaging in a hobby.
If you are engaging in a business, then you have the opportunity to list ALL of the expenses you had for the year in running that business, and those expenses count against any business income for the year. Two columns: Income and Expenses.
If you are engaging in a hobby, then you do NOT have the opportunity to list any of those expenses, because there is nothing in the tax code about counting "hobby expenses" against one's bottom line. There is absolutely no Schedule in the tax code for a hobby, nor should there be. So you're left with one column here: Income.
Believe me, it dramatically behooves you to claim your music career as a business, rather than as a hobby. That way, everything you buy (music-related) is an expense toward running that business. If it's a hobby, you can't count anything.
But either way, whether it's a business or a hobby, the IRS requires you to report all income you had for the year, from all sources. (Again, there are some things that are not considered income, such as financial gifts or certain kinds of donations.)
And what's more, nothing I have said above is any different than any other tax year. It has always been thus. You may have chosen to not report all of your income in the past--hell, you can choose to not report all income going forward if that's what you want to do--but none of the rules for you or me have changed.
Does this make more sense? I really want to explain things in a way that provides clarity. I'm not defending current tax policies, I'm just trying to explain what those policies are and how to navigate them.
Mark I think how we need to state this is: you are getting a 1099 because you were engaged in some commercial activity, it is upon the individual to prove weather this is a buisness or shown a profit on that activity, in other words this is treating miscellaneous income like it always have just like any other financial gain on your tax forms. Now one can bitch and moan philosophically about the new rules and it will get you nowhere, these are the rules . If you to make a logical argument about part of this that probably even most of the IRS would back you on because of all the paperwork, why hasn’t the reporting threshold changed since at least 1990? $600 dollars in 1990 dollars adjusted for inflation is $1400 today. The threshold should have a built in adjustment for inflation or every year your generating more 1099’s just because of inflation. Also just to show how easy it is probably going to be with these, I’ll bet your going to see your fees and shipping included on your 1099’s that will be really easy to show as costs of doing buisness. Add cost of boxes and packing supplies you have knocked off more. Now I’m sure someone with a good lawyer will fight this and say that Reverb, PayPal or eBay shouldn’t be reporting all of this because unless all your sales were not from one source and shouldn’t be bundled. Example A single rep firm probably wrote me Spiff checks funded by 3 different vendors, I didn’t get one 1099. I got one from each manufacturer who paid me more than $600, but I received the money from the same rep and bank account. |
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cj
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Post by cj on Dec 1, 2023 15:23:18 GMT -6
For a hobby, this is how you can handle it on your personal tax return. For example, you receive a Form 1099-K that includes the sale of your recording equipment online for $5,000, which is less than you paid for it. On Schedule 1 (Form 1040): - Enter the Form 1099-K gross payment amount (Box 1a) on Part I – Line 8z – Other Income: "Form 1099-K Personal Item Sold at a Loss, $5,000"
- Offset the Form 1099-K gross payment amount (Box 1a) on Part II – Line 24z – Other Adjustments: "Form 1099-K Personal Item Sold at a Loss, $5,000"
These 2 entries result in a $0 net effect on your adjusted gross income (AGI). Unfortunately, if you ever get audited you will need to back up your original cost of the equipment with documentation. |
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cj
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Post by cj on Dec 1, 2023 15:44:25 GMT -6
Personally, I would go further than that, Eric. If you receive a 1099 from someone, that’s almost proof positive that you ARE a business. Because that means someone hired you in a professional manner. I don't mean to be nit picky, I understand your general point but technically that's not how the IRS defines it.
The IRS defines businesses and hobbies very differently and it is not straightforward. Every year, the IRS goes after a lot of people that try to claim business expenses for an endeavor that is really just an expensive hobby. For those that are interested, the IRS publishes guidance on how to determine if income is from a hobby or business.
I just wanted to mention this because I would hate to see someone try to claim business expenses just because they received a 1099.
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Post by the other mark williams on Dec 1, 2023 18:05:12 GMT -6
Personally, I would go further than that, Eric. If you receive a 1099 from someone, that’s almost proof positive that you ARE a business. Because that means someone hired you in a professional manner. I don't mean to be nit picky, I understand your general point but technically that's not how the IRS defines it.
The IRS defines businesses and hobbies very differently and it is not straightforward. Every year, the IRS goes after a lot of people that try to claim business expenses for an endeavor that is really just an expensive hobby. For those that are interested, the IRS publishes guidance on how to determine if income is from a hobby or business.
I just wanted to mention this because I would hate to see someone try to claim business expenses just because they received a 1099.
This is a great point, CJ, and I’m glad you brought it up. If anyone doesn't know how all this stuff applies to their situation, they should definitely seek a consultation with an accountant. I don’t have that much experience with the hobby side of things. Music and studio work (and these days, video) have been significant streams of income for me for about 25 yrs now. |
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Post by chumley56 on Dec 1, 2023 18:30:54 GMT -6
Just to dial it in a bit more. There are at least 17 different 1099 forms. They can be issued to cover many types of income or payments. Not all are related to the recipient providing services or selling goods. The 1099-K change that freaked everyone out was intended to make it harder to avoid declaring income paid by third party payment processors including Ebay, Reverb, Etsy and so on. The problem is rather complex and the IRS change was intended to capture more of the unreported income from online sellers. The big problem is that many people sell personal or household items like old clothes or appliances etc. How many people keep all of their receipts for that stuff?  If you sold personal items the rule change would make the payment processors report that as new income, which it may or may not be. If, for example I had a guitar that I bought in the 80's and sold at a loss in 2023 I would owe tax on it as income under the revised ruling unless I had the date of purchase and purchase price on a receipt. It's kind of not fair to change the rules on things bought before the change took effect. If on the other hand you are a professional and are selling gear that you have depreciated for business use, then it makes sense that you pay tax on the gain. |
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Post by thecolourfulway on Dec 2, 2023 11:41:23 GMT -6
I saw this thread and naturally thought, “whoa cool, what new delay is $600?”
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If you sold personal items the rule change would make the payment processors report that as new income, which it may or may not be. If, for example I had a guitar that I bought in the 80's and sold at a loss in 2023 I would owe tax on it as income under the revised ruling unless I had the date of purchase and purchase price on a receipt. It's kind of not fair to change the rules on things bought before the change took effect. If on the other hand you are a professional and are selling gear that you have depreciated for business use, then it makes sense that you pay tax on the gain. 